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Markets for Green Power
Green
Power Programs
When designed correctly, green power programs -- through
which utility customers pay a little more on their electricity
bills to support renewable energy -- can effectively promote small
wind turbine installations.
Unfortunately, utilities typically apply
customers’ green power premiums only to purchases from commercial
renewable energy facilities, neglecting to provide incentives
for small wind turbines or other residential energy systems that
don’t generate electricity for commercial sale.
But some utilities have made development
of small-scale, locally generated clean energy a priority goal
of their green power programs. These utilities pool green power
premiums into a fund that is then used to help defray the installation
costs of new small-scale energy systems. The utilities may either
provide the owners upfront payments when they purchase a system,
or pay the owners a premium rate of return for their electric
generation.
For Example:
(1)The Chelan County (Washington) Public Utility District’s
Sustainable
Natural Alternative Power program (SNAP) promotes projects
within the PUD’s service territory. Two 10-kilowatt wind
turbines and four solar projects have been installed through the
program since its inception in August, 2001. The utility pays
a premium rate for the electricity (up to $1.50/kilowatt) that
is based on total annual customer contributions to SNAP. A SNAP
starter program is available to other utilities.
(2)The Orcas Power & Light Cooperative
(OPALCO) Green Energy
Program provides upfront payments for small wind turbine installations
based on expected generation during the first year. Producers
also receive a production incentive based on output in subsequent
years. The OPALCO program has achieved the third highest customer
participation rate in the nation and currently has one small wind
turbine participating along with three micro-hydro projects and
14 solar installations.
Green
Tag Marketing
Small wind turbine owners can sell Green
Tags (aka tradable renewable certificates) to earn extra income
from their generation. Owners are encouraged to form or join cooperatives
that combine Green Tags from various residential-scale systems
to secure the best price and access to broader markets. Various
utilities and organizations market Green Tags, but some will only
contract with producer cooperatives. (To learn about Green Tag
marketers in your area, see the Center
for Resource Solutions website.)
Green Tags are marketed to businesses and
individuals who want to pay the cost of electric generation that
is pollution-free. Purchasing Green Tags is similar to subscribing
to utility green power programs, but with one important advantage
for small wind turbine owners: the money customers spend on Green
Tags can be invested directly in any project that offsets conventional
fossil-fuel generation. In
green energy programs, customer contributions typically purchase
renewable energy only from commercial facilities the utility chooses
to contract with.
The Green Tag marketer is a more direct
link between a customer or business willing to pay for clean electric
generation and the small producer whose generator doesn’t
produce electricity for sale through a utility. The marketer can
pool Green Tags and use them to provide upfront capital to install
small wind turbines and other residential power systems.
For Example:
The Bonneville
Environmental Foundation (BEF) in Portland, Oregon, is the
nation’s largest Green Tag marketer, partnering with a variety
of utilities and cooperatives to fund small-scale energy systems
across the Pacific Northwest. BEF invests directly in regional
projects and informs Green Tag purchasers what specific generating
sources their contributions support.
Renewable
Energy Standards (aka
Renewable Portfolio Standards)
State and national policies requiring electric utilities to increase
the amount of renewable energy they use to serve their customer
loads can open new opportunities for residential wind development.
A 2002 report from the Lawrence Berkeley
National Laboratory concluded that Renewable Energy Standards
(RES) create critical market opportunities for renewable energy
sources, without which government financial incentives promoting
renewables have limited effect.
Under Renewable Energy Standards, utilities
must derive a certain percentage of their generation from renewable
resources like wind, creating guaranteed demand for renewable
power. Commercial projects will be the first to supply that need,
but as utilities gain more experience with renewable energy systems
it's expected that they will more willingly accommodate all kinds
of clean energy projects.
Policymakers may also direct utilities
to focus on smaller producers. The Iowa legislature, for example,
considered an RES in 2003 that would have specifically required
utilities to derive a certain percentage of their renewable generation
from locally owned, small-scale projects.
Renewable Energy Standards have passed
in 13 states: California, Texas, New Mexico, Nevada, Arizona,
Iowa, Minnesota, Wisconsin, New Jersey, Pennsylvania, Connecticut,
Massachussetts, and Maine (A federal standard of 10% is included
in the pending 2003 energy bill).
These states are proving that the standards
work. Texas in particular has seen an explosive growth in wind
power; wind turbines were largely responsible for the state producing
more than twice as much renewable power as its standard called
for by 2002. In Minnesota, the standard helped open markets to
farmers who cooperatively invested in small-scale commercial wind
farms.
Renewable Energy Standards are good public
policy. They protect consumers from rate increases, enhance the
domestic energy supply, and improve national security. The California
energy crisis of 2001 and the painful economic effects of spiraling
gas prices reveal the folly of over-reliance on fossil-fuel generation.
Renewable Energy Standards diversify our mix of resources and
lock in a supply of affordable electricity that costs the same
no matter what the energy markets are doing.
Renewable energy projects -- especially
small-scale generators -- also create power closer to where it's
needed, reducing the stress on transmission lines that recently
caused massive power outages in the Northeast.
Renewable Energy Standards do not force
electric utilities to invest in additional generation that they
don't need. Utilities for which new power acquisitions are not
feasible can purchase tradable renewable energy credits. Renewable
Energy Standards typically obligate utilities
to acquire credits equal to some percentage of their retail power
sales, ensuring their support for new renewable energy development
without requiring uneccesary capital investments.
Model:
View
the attached language
For Example: In
Connecticut,
Nevada,
and New
Jersey, renewables portfolio standards (RPS, also referred
to as renewable energy standards, or RES) were created in the
late 1990s as part of legislation restructuring the electric utility
industry. A number of these standards have been revised since
their initial passage. Connecticut’s
RPS now requires that 10% of all retail electricity sales come
from renewable resources by 2010, and applies to all electricity
suppliers and electric distribution companies providing standard
offer, transitional standard offer, standard service or back-up
electric generation.
Nevada’s
legislature revised the minimum amounts to increase by 2% every
2 years, starting with a 5% renewable energy requirement in 2003
and achieving a 15% requirement by 2013 and each year thereafter.
Nevada’s
Public Utilities Commission (PUC) adopted a temporary regulation
that allows energy providers to buy and sell renewable energy
credits (REC), with a premium for electricity generated from solar
photovoltaics by a retail customer who uses at least half the
electricity on the premises.
New Jersey’s restructuring legislation categorizes renewables
by class and requires all retail electric suppliers to provide
set percentages of their energy from Class I renewable resources
(including wind, solar, fuel cells, ocean energy, landfill methane
and sustainably cultivated and harvested biomass), plus an additional
percentage from either Class I or Class II.
Distributed
Generation Tariffs
A few states that have Renewable Electricity Standards
have taken steps to ensure that locally owned, small-scale energy
systems become significant contributors of renewable power along
with larger commercial facilities.
This is good policy because (1) a network
of smaller, distributed power sources can ease transmission congestion
and (2) smaller systems provide opportunities for farmers, small
businesses, and even schools to profit from wind turbines and
other renewable energy projects. But small-system owners may find
it more difficult than commercial wind developers to gain access
to distribution lines and negotiate an agreeable price with utilities
unless states level the playing field.
Distributed generation tariffs are designed
to provide small systems fair access to distribution lines by
standardizing interconnection agreements. They simplify negotiations
and reduce transaction costs for both producers and utilities,
provide equitable treatment for producers, and ensure the safe,
reliable operation of the interconnected systems. They may also
guarantee small-scale producers a sustainable price for their
electricity.
For Example:
Minnesota is pioneering efforts to promote distributed generation
resources, especially small wind turbines. As a result, the state
now hosts a handful of small, farmer-owned wind farms. To learn
more about farmers, schools, and businesses generating profits
from small wind turbines, see the
Windustry Newsletter.
The Minnesota legislature has ordered the
state’s largest private utility to develop 100 megawatts
of energy from small wind systems no larger than 2 megawatts,
and the state public utility commission (PUC) has ordered the
utility to add small wind systems to its lines as a condition
for approving transmission upgrades. For more details, and to
keep up with the latest developments affecting small wind in Minnesota,
see the Minnesotans for
an Energy-Efficient Economy website.
The Minnesota PUC has also established
a distributed generation tariff specifically applicable to small
wind energy systems. It includes a fixed rate for electricity
produced by qualifying systems. See Xcel's Small
Wind Energy Tariff. You can also read Xcel's standard
power purchase contract and interconnection agreement
The PUC is still debating specific details
of its distributed generation tariff. To stay apprised of the
latest submitted comments, see www.puc.state.mn.us/docs/briefing_papers/b01-0001.pdf
or www.newrules.org/dgtariff/.
Government
Purchase Commitments
Many public institutions are large electricity
consumers that could create markets for wind energy and other
renewable generation, much as the U.S. Parks Service did for biofuels
by converting maintenance fleets at Yosemite and Yellowstone national
parks to biodiesel.
Government purchases of environmentally
preferred products set a highly visible example for businesses
and other consumers to follow. A few public electric utilities
-- notably Austin Energy, Seattle City Light, and the Chelan (Washington)
Public Utility District -- pioneered green energy programs.
State and local government agencies could
1) preferentially purchase renewable energy directly from renewable
energy generators and 2) install small-scale renewable energy
projects for on-site generation at schools, universities, parks,
and other public facilities.
For Example:
Santa Monica, California was the first city in the world to
power all its municipal facilities exclusively with renewable
resources, purchasing approximately 5 megawatts of renewables.
The City
of Los Angeles purchases 10 percent of its electricity from
renewable sources.
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